Allot Acquires Esphion for Network and Subscriber Protection Solutions

Allot Communications has signed a definitive agreement to acquire the business of Esphion Limited, a developer of network protection solutions for carriers and internet service providers. Allot believes that the acquisition furthers its vision of offering value-added services on its new Service Gateway platform to help broadband providers build secure, intelligent networks.

Allot plans to integrate Esphion’s products and technology into its entire product portfolio, including the recently announced Allot Service Gateway, the industry’s first open, standards-based platform for broadband service control and optimisation capable of supporting more than 20 Gigabits per second (Gbps) of traffic.

Network and subscriber security is a primary concern for broadband operators, which deliver high-quality, always-available access services to their subscribers. Esphion’s granular network and subscriber behaviour analysis (NBA) technology provides an accurate way to detect the root cause for security attacks over 10Gbps communication links.

The integrated, self-contained, solution will allow service providers to extend Allot’s traditional DPI capabilities and policy-based Quality of Service enforcement with mitigation of security threats. This includes isolation and remedy of infected subscribers (known as botnets, generating spam traffic and other attacks) and Distributed Denial of Service (DDos) attack prevention. The result is a highly competitive security solution for the service provider market in terms of performance, efficiency, ease of implementation and accuracy.
“Carriers and ISPs see increasing value in having a purpose-built device managing their application and subscriber visibility, management and control,” said Mark Bieberich, Vice President, Communications Infrastructure Research at Yankee Group. “The integration of Esphion security threat detection technology into Allot’s Service Gateway is a clear example of a solution engineered to meet this growing market need.”

Under the terms of the agreement, Allot will acquire all material assets of Esphion for $3.5 million in cash plus up to an additional $2 million of performance-based consideration if certain targets are met during 2008. Esphion’s employees, who are based in New Zealand, will become part of Allot’s global operation. Allot anticipates that on a non-GAAP basis, the acquisition will be around $0.02 dilutive to earnings per share from continuing operations in the first quarter following the closing of the transaction, and will become accretive to earnings per share within one year of closing. Allot expects that on a GAAP basis earnings per share from continuing operations will be more dilutive, primarily due to purchase price accounting associated with the acquisition. The exact impact of this will not be known until after Allot completes allocation of the purchase price pursuant to such accounting. The acquisition is subject to various closing conditions and is expected to close within 7 days.

“The strategy behind our Service Gateway is to build upon Allot’s best-of-breed DPI technology and integrate value-added services onto the platform through acquisition, OEM and partnerships,” said Rami Hadar, Allot’s CEO and President. “This solution that will enable our customers to offer new revenue-generating services, combined with network analysis and network control capabilities, in one integrated, DPI-based application and subscriber-aware solution. We chose Esphion based on their behaviour analysis technology, ability to scale to 10Gbps, and positive reports we received from their top tier customer list.”

“Esphion has developed unique technology to detect network and subscriber behavioural security problems,” said Mark Edwards, CEO of Esphion Ltd. “Our products have already been successfully deployed at, and are being used by, several major carriers and ISPs throughout Asia-Pacific. Combined with Allot’s DPI platform and world-wide sales organisation, we intend to open up new market opportunities for our leading-edge solution.”

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